Indian professionals will gain freer access to the UK and British exporters secure easier entry to India’s vast market through dramatic tariff cuts under a comprehensive trade deal signed between Prime Minister Narendra Modi and his UK counterpart Keir Starmer on Thursday, hailed by both as a landmark partnership for shared prosperity. Jonathan Reynolds, UK business and trade secretary, Narendra Modi, India’s prime minister, Keir Starmer, UK prime minister, and Piyush Goyal, India’s commerce and industry secretary, left to right, during a news conference after signing a free trade agreement at Chequers near Aylesbury, UK, on Thursday. (Bloomberg)

The pact will boost two-way commerce by $35 billion in the long run and the two sides also unveiled plans to negotiate a Double Contribution Convention (DCC) that exempts employers of Indian workers from paying social security contributions in the UK for three years in what is expected to particularly help finance and technology sector workers.

They will also work on a Defence Industrial Roadmap for closer cooperation on military hardware. The DCC will come into force alongside the trade deal.

In London, Modi described the deal as “not just an economic partnership, but a plan for shared prosperity” that will benefit India’s youth, farmers, fishermen and MSME sector. Starmer said the agreement is the “biggest and most economically significant trade deal” concluded by the UK since leaving the European Union (EU) in 2020 and also “one of the most comprehensive deals” by India.

India and Britain finalised the Comprehensive Economic and Trade Agreement in May after more than three years of negotiations, and the pact was signed by commerce minister Piyush Goyal and his UK counterpart Jonathan Reynolds during Modi’s visit to Britain.

With the economic turmoil unleashed by US President Donald Trump’s tariffs as the backdrop, both sides overcame long-standing differences on issues such as levies on British alcohol and automobiles, which are set to drop.

Duties on British whisky imports drop from 150% to 75% immediately, falling to 40% over 10 years. UK automotive exports will see tariffs reduced from up to 110% to 10% under quota arrangements.

The gains for both sides, however, are much broader with the UK eliminating tariffs on 99% of Indian exports (up from roughly 65% that previously enjoyed zero or near-zero duties).

A look at India and UK’s respective gains due to the FTA signing.(HT)

Speaking at a media interaction with Starmer, Modi said: “On the one hand, Indian textiles, footwear, gems and jewellery, seafood and engineering goods will get better market access in the UK. New opportunities will be created in the UK market for India’s agricultural produce and processed food industry.”

He added, “On the other hand, products made in the UK, such as medical devices and aerospace parts, will be available to the people and industry of India at accessible and affordable rates.”

The DCC, Modi said, will give new energy to the services sectors of both sides by boosting the ease of doing business. “Along with this, the UK economy will get Indian skilled talent,” he said. He added that the deal between two democratic countries and major economies will strengthen global stability and prosperity.

Starmer said that apart from benefiting whisky distillers in Scotland and the services sector in London, Manchester and Leeds, the deal will bring down prices on Indian goods such as clothes, shoes and food. “It will add about £4.8 billion to the UK economy every year and £2.2 billion to wages and hundreds of millions of pounds to regions and nations up and down the UK,” he added.

The India-UK Vision 2035, aimed at renewing the bilateral comprehensive strategic partnership, will serve as a roadmap for a reliable partnership in technology, defence, climate, education and people-to-people connect, Modi said. The two sides will also work to strengthen their Technology Security Initiative, launched a year ago to drive cooperation in telecom, critical minerals, IA, semiconductors, quantum computing and biotech.

Key beneficiaries of the deal announced on Thursday include India’s textiles and clothing sector, where complete tariff elimination from the current 12% level will enhance competitiveness against Bangladesh and Vietnam. Processed food exporters will see duties fall from as high as 70% to zero on 99.7% of tariff lines, while marine products will enjoy zero duties down from 20%.

In the services sector, Indian service providers are expected to benefit from opportunities in the UK, especially in management consultancy, computer-related services and education services. The deal also eases mobility for Indian professionals, including contractual service suppliers working on projects in the UK, yoga instructors and chefs.

“Along with this, the UK economy will get Indian skilled talent,” Modi added.

The inclusion of a first-of-its-kind trade and gender chapter in the trade deal is aimed at empowering Indian women and ensuring gender inclusion, with targeted support for women-led enterprises and workers.

The FTA excludes India’s most sensitive agricultural segments, with no tariff concessions on dairy products, apples, oats and edible oils. These exclusions, the officials said, reflect India’s calibrated trade strategy that prioritises food security, domestic price stability and protection of vulnerable farmers.

The deal’s sanitary and phytosanitary (SPS) measures will help Indian exporters meet British standards and reduce rejections, the officials said.

In return, India has reduced average tariffs on UK exports from 15% to 3%.

“Products made in the UK, such as medical devices and aerospace parts, will be available to the people and industry of India at accessible and affordable rates,” Modi said.

India-UK trade in goods and services was worth $57.8 billion in 2024, an increase of 8.3% from 2023, with India ranking as Britain’s 11th largest trading partner. India’s imports from the UK amounted to £17.1 billion while exports to the UK were worth £25.5 billion.

Total bilateral trade in goods was worth £17.8 billion, while services trade amounted to £24.8 billion, with India accounting for 2.4% of the UK’s total trade. The deal is projected to see India’s agricultural exports rise by 20% in the next three years. Officials said the benefits for Indian farmers in UK markets will match or exceed those enjoyed by exporters from Germany, the Netherlands and other EU members.

“This agreement establishes a modern, forward-looking partnership that will stimulate innovation, ease market access and foster investment,” said Sunil Bharti Mittal, chairman of Bharti Enterprises and co-chair of the India-UK CEO Forum, who led a 16-member Indian business delegation.